Today's decision follows the Commission's conditional clearance in March 2018 of Bayer's planned acquisition of Monsanto. Bayer committed to divest an extensive remedy package worth well over €6 billion (the "Bayer Divestment Business") to address the competition concerns on overlaps between Bayer and Monsanto in seeds, pesticides and digital agriculture. The Commission concluded that this divestment package would enable a suitable buyer to sustainably replace Bayer's competitive effect in these markets and continue to innovate, for the benefit of European farmers and consumers.
The Bayer Divestment Business includes:
- Bayer's entire vegetable seeds business;
- Bayer's entire broad acre seeds and traits business including its R&D organisation, subject to limited carve outs;
- a number of Bayer non-selective herbicide assets, in particular Bayer's global glufosinate business assets and three lines of research;
- a number of Bayer nematicidal seed treatment assets and products (sold under the Poncho, VOTiVO, COPeO and ILeVO brands); and
- Bayer's global digital agriculture assets and products (subject to a temporary licence back from BASF to Bayer).
Since BASF does not currently sell seeds or non-selective herbicides and has only recently started to develop a limited offering in digital agriculture, the Commission did not identify competition concerns with most parts of the transaction.
However, the Commission had concerns that the transaction would have reduced innovation competition in the European Economic Area for the development of certain non-selective herbicides as well as potential competition for the production of nematicidal seed treatments. To address these concerns BASF committed to divest:
- one of the overlapping lines of research for the development of non-selective herbicides; and
- a BASF pipeline nematicidal seed treatment product, Trunemco.
The Commission found that the proposed commitments fully address the overlaps between the Bayer Divestment Business and BASF in the innovation areas and in the markets where the Commission had identified competition concerns.
The Commission therefore concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with the commitments.
The Commission has cooperated very closely with a number of competition authorities on this case, including the US Department of Justice.
As regards Bayer's planned acquisition of Monsanto, the Commission's March 2018 decision requires Bayer to sell the Bayer Divestment Business to a suitable purchaser. The Commission continues to assess whether BASF has the ability and incentives to run and develop the Bayer Divestment Business to replicate Bayer as an active competitor in the market, and whether the agreements between Bayer and BASF are in line with the commitments. The decision adopted today does not prejudge the outcome of that separate assessment.
Companies and products
BASF, headquartered in Germany, is a large diversified chemical company active in a range of sectors including chemicals, performance products, functional materials and solutions, agricultural solutions and oil & gas. This transaction mainly concerns the agricultural products sector, where BASF is active in the areas of chemical and biological crop protection, seed treatment, nutrient supply and plant stress.
Bayer, headquartered in Germany, is a diversified pharmaceuticals, consumer health, agriculture (Bayer Crop Science) and animal health company. This transaction mainly concerns the Bayer Crop Science division. Bayer Crop Science operates three business segments: (i) Crop Protection (i.e. pesticides); (ii) Seeds and Traits; and (iii) Environmental Science. Bayer is also active in developing and providing digital agriculture services.
Merger control rules and procedures
BASF notified this transaction to the Commission for assessment under the EU Merger Regulation on 7 March 2018. On 9 April 2018, BASF adapted the scope of the initially notified transaction in order to reflect changes to the Bayer Divestment Business. This followed Bayer's requests to modify the commitments in the Bayer/Monsanto transaction as regards nematicidal seed treatments and digital agriculture, which the Commission approved on 11 April 2018.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
There are currently four on-going phase II merger investigations: the proposed merger between Praxair and Linde, the proposed acquisition of Cristal by Tronox, the proposed acquisition of Ilva by ArcelorMittal, and the proposed acquisition of Shazam by Apple.